The US saw key developments in Q3 with its downgrade by S&P for US debt and the lifting of the debt ceiling by the US government. While the congressional committee must continue to find spending cuts, in the worst case scenario the US could reach the new debt ceiling in January 2012. BMIs 2012 real GDP growth forecast has recently been downgraded, to 2.0% from 2.4%. Our analysis suggests that the US is dangerously close to a recession. This change in perception for the economic outlook may result in a temporary pause in the recovery of the property sector. Concerns have arisen among real estate players (and the public) about Washingtons success so far in addressing fiscal issues. This has resulted in declining confidence in any substantial commercial recovery, according to a survey by the Real Estate Roundtable.

Despite the well publicised economic uncertainty surrounding the US, there has been a surprising level of optimism in the commercial real estate market with regard to new developments, purchases and investments. The country seems to be remaining positive in the face of a potentially subdued market, which could help to bolster real estate in the event of any further decline in the economy.

Key Opportunities In The Real Estate Market

- After a better-than-expected Black Friday period for retailers, the holiday retail season is expected to be extremely positive and is likely to cushion retail real estate activity in the short term.

- Prime office markets seem to be holding up well, in spite of the economic uncertainty.

Recent deals involving desirable office space have highlighted that this side of the market could help to boost areas of the office sub-sector which may fare less well in the coming months.

- A number of real estate developers have recently begun targeting overseas investors, in the hope that a fresh wave of commercial investment could result from international companies.

- It appears that strong tourism levels continue to buoy real estate activity in that area, with a number of new hotel projects announced in recent months.

Key Risks To The Real Estate Market

- If the economic recovery does stall, the progress currently occurring in the property sector will slow. Impediments to economic recovery include high energy and commodity prices, unemployment, the level of debt in the US and the eurozone, and the US budget deficit.

- Cushman & Wakefield reported a slowing in the recovery of the office market in Q311, meaning that optimism in the sector could be short-lived.